Thorough Appraisal of Hospitality Establishments

Especially with the economic and societal changes brought on by Covid, formal appraisers have their work cut out for them, aiding in the process of refinancing, purchasing, and selling hospitality-related real estate. Determining the market value of hospitality is based on several pertinent factors. Hotels, motels, and inns have unique characteristics, amenities, locations, and customer bases. As such, professional commercial real estate appraisers must give a thorough consideration and analysis to these property-specific elements, economic realities, the surrounding environment, and how the property can best be utilized. These focus areas of criteria are essential for owners of places of lodging to be aware of, as well.

Location

The position of a hospitality property and its immediate surrounding neighborhood real estate plays a huge role in market value. Related factors at this micro-level include accessibility to the area and overall appearance. The larger surrounding region is also a significant factor on the macro level in determining accurate value. This wider view includes consideration of the economy of the larger area, as well as the social, environmental, and political state. These and, more specifically, real estate-focused elements all have a hand in official property value. 

Environment

When carrying out a professional appraisal, the environment of a piece of hospitality real estate refers to the property’s individual site, natural environment, and accompanying structures and facilities. An in-depth analysis of these elements gives appraisers a comprehensive idea of such issues and realities as:

  • Urban Planning and Zoning, Indicating Possible Future Developments and Changes
  • Quality and Sufficiency of Utilities
  • Flood Risks
  • State of Facilities and Standing in Current Trends of the Market
  • Depreciation Factors of Facilities (Base Structure, Roof, Accompanying Fixtures, Equipment, Furniture, and Both Decorative and Functional Materials); Consideration of Age of all Facility Elements, Estimation of Period of Use, and Estimated Time Remaining in terms of Economic Viability
  • Quality Assurance Data on the Business’ Brand, Professional Performance
  • Property and Real Estate Taxes, Including Local Assessment and Taxation, Past Taxation Rates, and Expected Future Adjustments

Supply and Customer Demand

A thorough examination of the competitive market within which a hospitality establishment operates is also essential for determining its value. A professional appraiser must look at factors including:

  • Reviewing Comparable Establishments Locally and Determining What Makes the Subject Property Competitive
  • Clear Picture of Upcoming Renovation and Additions (Rooms, Amenities, Etc.), Therefore, the final determining market value must be a composite view of relevant forces within the real estate market and its ideal and optimal use. 
  • Clear View of Current Rooms and Amenities that Make Establishment Valuable
  • Past and Present Demand Trends for the Amenities and Characteristics of the Establishment
  • Occupancy Levels and Lodging Rates of All Pertinent Comparable Competitors
  • Projections of Accurate and Average Lodging Rates and Visitor/Occupancy Levels

Optimal Use

Appraisal of all real estate, including the commercial sector, must include an examination of what is the most beneficial, competitive, and profitable use of the property. There are four principal areas of consideration for an appraiser to get an accurate picture of utilization in the ideal form: legality, physical limits, financial limits, and the highest possible level of efficiency and productivity. 

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